Forex interest returns

Investment in foreign currencies has hit an upturn as the UK pound, Swiss franc and Japanese yen decline. Investors have been encouraged by better sentiment with regard to the eurozone.

A surge in yen trading followed an announcement by the Bank of Japan that it would be introducing measures to counter deflation on 22 January. Barclays said it had seen two of its biggest trading days this month since May 2010. The bank’s head of forex, Mike Bagguley, said hedge funds had been pulled back into the market by the situation with the yen.

UBS said its trade in yen has risen by 100 per cent and Deutsche Bank said forex volumes were at record highs. A lack of activity last year meant that forex trading hit a slump and banks experienced falling revenues in the division.

A report by the Bank of International Settlements shows that London is responsible for 37 per cent of all forex trading on a daily basis and that in October trading was down by five per cent compared to April and 11 per cent lower than it was in October 2011.

ICAP released figures this month that indicated a four per cent drop in trading. However, many investors are now reporting a move away from the ‘risk on, risk off’ trading that seemed to dominate the markets in 2012.